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June 2017 MedPAC Report Recommends Changes to Part B Drug Payments, Creation of a Single PAC PPS, and Improvements to MACRA

June 16, 2017—The Medicare Payment Advisory Commission (MedPAC) June 15 released its June 2017 Report to Congress, which includes a series of recommendations affecting Medicare Part B drug payments, the creation of a unified post-acute care (PAC) prospective payment system (PPS), and feedback on redesigning the Merit-based Incentive Payment System (MIPS) and advanced alternative payment models (A-APMs) under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, P.L. 114-10).

The June report includes recommendations to change Medicare’s current payment structure for Part B drugs. Medicare and its beneficiaries paid approximately $26 billion for Part B drugs and biologics in 2015, and spending on these drugs has increased at an average rate of 9 percent per year. The report cites the lack of competition among drugs with similar health benefits, the rapid growth in part B spending, and the overall price of Part B covered drugs as the rationale for these changes. The commission proposed implementation of an average sales price (ASP) inflation rebate, a reduction in the wholesale acquisition cost (WAC) payment rate, and the consolidation of reference biologic and biosimilar drugs into one billing code.

The commission also recommends a unified PPS for PAC services, which includes skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals. Medicare’s payments for stays in these four programs differ substantially. The commission recommends that the PPS start in 2021, and include a three-year transition period. Other recommendations for the PAC PPS included lowering aggregate payments by 5 percent, aligning setting-specific regulatory requirements, and periodically revising and rebasing payments.

The report highlights concerns with MACRA’s MIPS and A-APMs and provides a range of ideas to adjust the program. The commissioners did not offer specific recommendations. The changes outlined in the report include an alternative model for MIPS that would withhold physician payments up front (and which would be returned depending on performance on the quality measures) and a transition from the current measure set to a limited number of population-based outcome measures collected through surveys and claims data. The commission also discussed changes to how the incentive payments are calculated under the A-APMs.

Additionally, the report includes proposals for policymakers to consider regarding stand-alone emergency departments (EDs). Previous MedPAC reports examined stand-alone EDs in rural areas, along with the overall lack of Medicare claims data for stand-alone EDs. The proposals include consideration of reducing payment rates for off-campus EDs (which are affiliated with a hospital), promoting stand-alone EDs in areas of the country that do not currently have adequate access to EDs, and removing policy exceptions to site-neutral payments for ambulatory services.